USDA says: Animal agriculture showing resilience

If there's a spot of brightness in the economic murk of agriculture these days, it may be animal agriculture, which the USDA's chief economist, Keith Collins, says has stayed resilient despite September 11, diseases, and recession.

And, he said at the Agricultural Outlook Forum 2002 in Washington, horticultural markets are becoming a more important contributor to farm income for many U.S. producers.

During the past two years, Collins noted, livestock and livestock product prices “generally moved up, cash receipts grew faster than for crops, and net returns were mostly positive.”

Over that period, U.S. meat and poultry production has stabilized, with lower beef production offsetting higher poultry production. “This has led to declines in per capita meat consumption since 1999, when consumption exceeded 220 pounds per person for the first time.”

The past two-year period has also seen a slowdown in milk production.

“The Sept. 11 attack caused a marked decline in restaurant and hotel business, where higher-value meat cuts, pork, and poultry are used extensively, and beef and pork loin prices fell. These effects were compounded by the general slowdown in the U.S. economy for beef and the fall-off in exports to Japan after the BSE (‘mad cow’ disease) discovery there. But, there probably will not be any long term repercussions from the Sept. 11 events.”

A key ongoing adjustment is taking place in the cattle market, which is the largest U.S. farm production sector, Collins said. “Cattle producers have been liquidating animals since late 1995, and the U.S. cattle inventory has been steadily declining. In 2001, beef production finally started to decline as the national herd continued to shrink. Today, little heifer retention is taking place.”

If the liquidation phase of the cattle cycle is to end, he said, the majority of the herd retention will have to come out of calves born this year — animals that would be bred in 2003 for calving in 2004.

“If this occurs, it's likely that beef production won't expand before 2005. The major constraint to expansion is forage; given dry conditions in many cattle areas, producers appear to be holding back on expansion until the forage base shows improvement.”

For 2002, beef production is expected to decline 2.5 percent, Collins said, and by another 1.5 percent in 2003. Fed cattle prices are forecast to continue rising, tempered by lower exports and the U.S. economic slowdown, to $74 per hundredweight in 2002 and then to $78 in 2003 as U.S. and global economies recover.

Prices for hogs and broilers are expected to remain about the same, or down slightly, in 2002. Pork production is forecast to be flat in 2002, with perhaps a modest 1.5 percent expansion in 2003, with slightly stronger prices. Broiler production is expected to rise 2.5 percent this year, but slow to 1.5 percent in 2003, with prices up slightly.

U.S. total meat exports are expected to rise minimally, less than a half-percent, the smallest increase since the mid-1980s.

Milk producers received the second highest all-milk price ever during 2001, Collins said, reflecting the largest year-over-year drop in production since 1984.

“The strong price increase will result in more production, with output up an expected 1.8 percent in 2001/02 and 2.5 percent in 2002/03. The all-milk price, which averaged $14.48 per hundredweight in 2000/01, could slip to $13.30 this season and into the $13 range next season.”

Horticultural markets have become and important contributor to farm income for many producers, Collins said.

“For 2002, cash receipts from fruits, vegetables, and greenhouse/nursery crops are forecast to reach $43.5 billion, up 2 percent from last year and 12 percent over 1998. Exports for fiscal year 2002 are forecast at $11.3 billion, up from $11.1 billion last year.”

U.S. fruit and vegetable consumption during the 1990s grew about 20 percent, he said, which was about twice the rate of population growth. “Consumption increased in part because of rising incomes, and retail price increases generally exceeded increases for other foods.”

Another factor in the higher demand, Collins said, “likely was a response to recommendations in the new Food Guide Pyramid and the 5-A-Day For Better Health campaign.”